Posts Tagged ‘how to repair bad credit’

We received few questions related to various topics in the last week and I am trying to reply these one by one through these posts.

Here is the first question from Rommi of New York asking “How can I repair my bad credit?”.

First of all, do you know it’s very easy to fix your bad credit through few easy to follow steps?

But before I share with you these steps, let me ask you how do you know that you have bad credit score. Have you got your credit report? Do you know your credit score? If you have all this information, then you are on the right track. If you haven’t got the credit report yet, you should immediately get one.

You can get free credit report from any of the following websites:

1. Free Credit Report from Consumer Direct:

2. Free Credit Score from Privacy Matters:

So I consider that now you have got your credit report and you are ready for action to fix your bad credit. The suggested steps are as follow:

Review your credit report carefully and identify the problem areas.

Once you identify the problem areas, check which one is more critical. In majority cases I have seen that credit card issues are more prominent. If it is due to any other reason like that old defaulted loan or any other such issue, at least now you know the real issue. Remember you can’t find the solution if you don’t know the problem.

Do you know your balance sheet? Are you asking what is this? Do you know your total income every month? Do you know your expenses? Are you spending less than what you earning? If you don’t have this snapshot of your financial life, then you should create one. Use this to analyze where you need to cut your expenses.

Start creating a budget every month if you don’t have one. Identify areas where you can save money or reduce your expenses. Once you identify those areas, divert that money towards paying your outstanding debts quickly.

Review your all outstanding debts and consolidate them to one loan.

Always pay high interest debts or loans first until these are paid in full. Use any surplus cash to pay the next highest debt.

If you have number of credit cards, then cut high interest credit cards instead of canceling them. By cutting those plastic cards, you will not use them but at the same time you will have credit in place on your credit history.

Check out your garage and other household items and see if you can set up a garage sale and use this cash to pay back your debt.

If you have too many credit cards, you should review all the credit cards and decide which ones you want to cancel. You should always inform them that you want to cancel the card.

If you are not disciplined and use credit cards with no control, then you should opt for prepaid credit cards or secured credit cards. This will ensure that you don’t cross your expenses.

OTHER RELATED RESOURCES

1. Credit Secrets Bible – A powerful eBook on how to manage your credit and how to fix your credit score.